Futures At Session Highs At Lunch After Q4 GDP Miss

At the Tokyo lunch break, JGB futures are sharply richer and at session highs, +43 compared to settlement levels, after the release of Q4 GDP data.

• Japan's Q4 GDP was weaker than expected, with the economy in a recession for the second half of 2023 at least based on the rule of 2 consecutive quarters of negative GDP growth. Annualised q/q GDP fell -0.4% versus a +1.1% forecast. Q3 was also revised lower, to -3.3% (from -2.9%). The q/q sa outcome was -0.1% against a +0.2% forecast and -0.8% prior.
• At face value, the data should diminish BoJ prospects for a near-term shift away from NIRP (say at the March meeting). The weakness in the expenditure components was quite broad-based.
• (DJ) The weakness in Japan's GDP data complicates the nation's monetary policy outlook, says Stefan Angrick, an economist at Moody's Analytics. "This makes it harder for the central bank to justify a rate hike, let alone a series of hikes," Angrick says, adding that no major gains in output are expected until mid-2024.
• Cash JGBs are richer beyond the 1-year, with the futures-linked 7-year leading (yield is 3.4bps lower). The benchmark 10-year yield is 3.3bps lower at 0.72% versus yesterday’s high of 0.765%
• The swaps curve has bull-flattened, with rates 1-3bps lower. Swap spreads are mostly tighter across maturities.